The Goods and Services Tax (GST) has completed almost three years of operation. Hailed as the single-biggest tax reform, the GST was rolled out with a gong in a special session of Parliament three years ago and subsumed 17 existing indirect taxes including the excise duty and sales tax.
GST was introduced as the biggest tax reform which is a fact showcased as ‘One Nation One Tax’. The initial period was very stressful for the trade and the government, but over a period of time it has stabilized to a large extent through many issues still remain unresolved.
GST is still a work in progress. It is evident from the 40 meetings of the GST Council that it has made various amendments to the GST rules.
In the year 2017, 29 circulars and 11 Orders were issued. In the year 2018, 44 Circulars and 7 orders were issued. In 2019, 44 circulars, 2 Orders, and 11 corrigenda were issued. In 2020, 10 Circulars, 1 order, and 1 Instruction were issued. In total 127 circulars, 21 orders, 1 instruction, and 11 corrigendum were issued.
GST is currently levied on every product except petroleum, alcohol, tobacco, and stamp duty on real estate in four slabs of 5, 12, 18, and 28 percent. Most of the daily use articles have zero GST as per the latest revision of the tax rates.
Significant Amendments in GST Laws
Section 16 (4) of the CGST Act is being amended to delink the date of issuance of debit note from the date of issuance of the underlying invoice for the purpose of availing input tax credit.
Section 51 of the CGST Act is being amended to remove the requirement of issuance of TDS certificate by the deductor and to omit the corresponding provision of late fees for delay in issuance of TDS Certificate.
Section 10 of CGST Act is being amended, so as to exclude from the ambit of the composition scheme certain categories of Taxable persons, engaged in making the supply of services not leviable to tax under the CGST Act, or Inter-state outward supply of services, or Outward supply of services through an e-commerce operator.
Section 132 of the CGST Act is being amended to make the offense of fraudulent availing of input tax credit without an invoice or bill a cognizable and nonbailable offense, and to make any person who commits, or causes the commission and retains the benefit of transaction arising out of specified offenses liable for punishment.
The definition of “Union Territory” in clause (114) of section 2 of CGST Act is being amended to update the definition of Union Territory in view of the bringing into force of the Jammu and Kashmir Reorganization Act,2019 and the Dadra and Nagar Haveli and Daman and Diu (Merger of Union Territories), Act,2019. Consequential changes are also being made in UTGST Act, 2017.
Entries at 4(a) & 4(b) in Schedule II of the CGST Act are being amended with effect from 01.07.2107 to make provision for the omission of supplies relating to the transfer of business assets made without any consideration from Schedule II of the said Act. The proposed changes in GST Laws will come into effect from the date when the same will be notified, as far as possible, concurrently with the corresponding amendments to the similar Acts passed by the states & Union Territories with the legislature.
Landmark GST Decisions so far
The Rajasthan High Court in the case of Bharat Raj Punj Vs. Commissioner of Central Goods And Service Tax relating to the fraudulent availment of ITC by the issue of fake or fictitious sale invoices held that it is an offense committed under Section 132 of the Act. It specifically covers cases leading to wrongful availment of an Input tax credit. The Department has the power to issue a summons or arrest the offender on reasonable grounds, without first determining the tax.
The Calcutta High Court in the case of Optical Health Solutions Pvt. Ltd. Vs UOI relating to the rectification or Revision of the GST TRAN-2 form should be allowed or not held that Law permits a person to rectify or revise the Form, who voluntarily admits to having made a mistake in the form or admits to having submitted detail that is not true. The tax authorities have the right to retain original Form GST TRAN-2 for assessment purposes and they may ask the petitioner to provide a proper explanation for such revision/rectification.
The Madras High Court in the case of Tvl. R K Motors Vs State Tax Officer relating to the powers conferred on a statutory authority should be exercised in a reasonable manner it was held that since the tax in respect of goods had already been paid and transportation was duly covered by proper documentation, authority is wrong in taking such harsh steps. Instead, the authority should have asked the driver to reroute the vehicle to the place of delivery.
The Madras High Court in the case of relating to the detention of goods cannot extend beyond a reasonable period of time held that a Squad officer can detain the goods only for the purpose of preparing relevant papers regarding any issue involved like the wrong classification of goods, and handover the papers to the jurisdictional assessing officer. But, final action can be taken only by the jurisdictional assessing officer.
In the pre-GST period, traders had to comply with the rules and regulations of various tax departments and laws. Now, tax compliance has been easier for traders. This has augured well for the government as the revenue base has expanded exponentially.
After GST implementation the export of goods and services will become competitive because of the nil cascading effect of taxes on goods and products.
The government’s revenue collection has also gone up. If Integrated GST (IGST) from imports are considered, total revenue rose 9%. IGST revenue on imported goods fell 10% from a year earlier. However, this was an improvement from a drop of 13% in November and 20% in October 2019.
The monthly average revenue collection increased further in 2018-19 by about 10 percent to Rs 97,100 crore. But despite this accomplishment, the revenue collection missed the target that the government had set for the GST for both the years since its rollout.
The years after the introduction of GST has witnessed the drastic rise in the offense of creating the fake invoices which are used to claim a fraudulent input tax credit (ITC), which is then utilized for the payment of GST Liability. These invoices have been found to be introduced by racketeers who do not carry any actual business and issue invoices without the actual supply of goods and services. This has ultimately shouldered the judiciary with lots of cases.
As we know Real Estate also plays an important role in the Indian economy but some experts think that GST will impact the Real Estate business negatively as it will add up the additional 8 to 10 percent to the cost and reduce the demand by about 12 percent.
GST is an indirect tax that is finally recovered from consumers of goods and services, in the form of an increase in sale price. Thus every consumer be he/she is rich or middle class or poor pays the same amount of GST for one unit of any product or service he avails in the market and here in India, the maximum population is of the middle class and lower middle class where people either belong to service class or they depend on agriculture for their living. It has a negative impact on the common man in India.
Talking about future expectations, it doesn’t mean only there is a lower tax rate but it also includes minimum tax slabs. Currently, in our country, there are 5 slabs, with 3 rates including an integrated rate, state rate, and a central rate. While the small shopkeepers and businesses bore taxes in the new regime, the government was also gambling on fewer or lower rates with the fear of losing out on revenue collection.
The implementation of GST has brought various changes including stability in inflation rates, the cascading effect of taxes, and the increased revenue from the taxes for the government. Along with that, the fiscal deficit is under the checks, exports would be promoted and Foreign Direct Investment would also be increased. The completion in the Indian market has grown up which would promote more export businesses.
Keeping the hopes of people, tax policies have played an important role to curb tax evasion and brought efficiency & equity in Indian taxation market.
More transparency can be seen in the taxation system and the tax official also has started making the system corruption-free with the help of promoting digitization. Tax compliance would be simple for businesses and the duplication of efforts will reduce.